Economics in the News – May 11-17, 2026
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o The United States has recently seen debt pass 100 percent of gross domestic product (GDP). The last time that federal debt held by the public was higher than GDP was in the immediate years following World War II. At that time, strong economic growth, occasional budget surpluses and inflation helped the debt-to-GDP ratio decline to 23 percent by 1974. However, the Congressional Budget Office projects that publicly held debt will surpass 175 percent of GDP by 2056.
Debt has increased in recent years due to the aftermath and fighting events such as the 2007-08 financial crisis and the COVID-19 pandemic. In addition, the care for an aging population, tax cuts, and interest has also played a role. Treasury bond yields reached their highest levels since 2007 at 5.12 percent, meaning that net interest payments exceed the defense budget. A major point of concern about the US debt is that the US heavily relies on foreign sources, it’s not held solely by domestic investors. [The New York Times]
o For the first time since it became a publicly traded company on the Tokyo Stock Exchange, Honda reported an annual loss. The company posted a net loss of $2.7 billion for its fiscal year, which ended at the end of March.
Like several other automakers, Honda invested billions into electric vehicles (EV) which has seen demand cool in recent years. Honda promised a full lineup of electric or hydrogen-powered vehicles by 2040 – a much more aggressive strategy than other Japanese automakers. Consumers steered away from Honda EVs, citing lacking infrastructure over charging capability and more expensive prices. Outside the United States, Honda is facing increasing competition throughout Asia with a number of low-cost Chinese vehicles becoming available, leading to lagging unit sales of 20 percent year-over-year. Honda plans to revert back to focusing on gasoline-electric hybrid models, and projects returning to profitability in the upcoming year. [The New York Times]
o Fed chair nominee Kevin Warsh is expected to be sworn in this week. He is set to begin his tenure as Fed chair in a tumultuous position. He won the nomination due to his agenda of lowering interest rates and reducing the Fed balance sheet. However, current economic conditions may make either of those two tasks difficult in the short term.
A sudden rise in inflation and a stabilizing labor market means that Fed policymakers are not eager to cut interest rates. Outside of the US, both the European Central Bank and the Bank of England have warned they may increase rates this year. If Warsh seeks to fulfill President Donald Trump’s demand for lower interest rates, he will likely face stiff opposition from other policymakers, including outgoing Fed chair Jerome Powell. [The Wall Street Journal]
o The majority of Americans oppose new construction of data centers being built in their communities, according to a Gallup poll. Roughly 70 percent of those polled said they would oppose a data center being built in their community. The poll found that more people would rather live near a nuclear power plant than a data center.
Local politicians across the country are balancing economic development and an increase in tax revenue with the public attitude against building data centers that are being used to spur demand for artificial intelligence (AI). Those against data centers argue that the power grid is already being overstressed and the enormous amount of energy used to power data centers will cause energy bills to rise. Others have environmental concerns, including the water supply and electricity. Leaders at major tech companies argue that data centers are essential to remain competitive. [The Washington Post]
o Many investors are wondering how the stock market continues to be resilient despite rising concerns over the US and global economy. Consumer sentiment in the United States is low, as inflation continues to rise and the Federal Reserve is not inclined to cut interest rates. The world is experiencing the greatest oil shock ever, with fuel shortages surging across Asia.
Despite it all, the stock market keeps surging to all-time highs. Author Kyla Scanlon believes that part of the explanation is that the markets have been trained to expect to be rescued by the federal government. For decades, the response to crisis has been injecting cash into the financial system and lowering interest rates. Scanlon warns that because of such, investors may not be adequately factoring in risk. However, there are also reasons for optimism in that corporate earnings remain strong. Advances in artificial intelligence (AI) could lead to an increase in productivity and an economic expansion. [Bloomberg]
